Over the past six decades, Warren Buffett, the CEO of Berkshire Hathaway, has been hailed as a beacon of investment wisdom, guiding both Wall Street professionals and everyday investors alike. While the S&P 500 has delivered impressive total returns, including dividends, nearing 34,000% since Buffett assumed leadership in the mid-1960s, Berkshire Hathaway’s Class A shares (BRK.A) have achieved an astounding aggregate gain of nearly 5,000,000%.
Buffett, often referred to as the “Oracle of Omaha,” alongside his esteemed colleague Charlie Munger, has demonstrated a remarkable ability to uncover undervalued opportunities in the market. Despite recent net selling of equities by Berkshire Hathaway, totaling nearly $39 billion between September 2022 and December 2023, a few select stocks have captured Buffett’s attention.
Among these are two energy stocks: Chevron (NYSE: CVX) and Occidental Petroleum (NYSE: OXY). Berkshire Hathaway has acquired over 248 million shares of Occidental Petroleum since 2022 and added approximately 15.85 million shares of Chevron in the December-ended quarter. Together, these two investments represent a substantial portion of Berkshire’s $368 billion investment portfolio.
The rationale behind Buffett’s interest in these energy stocks lies in the belief that crude oil prices will either remain elevated or potentially increase further. With many major energy companies scaling back capital expenditures during the COVID-19 pandemic, global crude oil supply has become constrained. This tightening of supply typically leads to higher commodity prices, benefiting companies like Chevron and Occidental Petroleum.
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Chevron, as the larger position, offers the advantage of being an integrated operator, involved in various facets of the energy industry, including exploration, production, and refining. Occidental Petroleum, while also integrated, relies more heavily on its drilling operations for revenue, making it particularly sensitive to changes in oil prices.
Additionally, Buffett’s notable investment strategy includes Berkshire Hathaway’s ongoing share repurchase program. Since July 2018, Buffett has consistently bought back shares of Berkshire Hathaway stock, a move made possible by adjustments to the company’s share repurchase criteria. With ample cash reserves and a belief in the intrinsic value of Berkshire’s shares, Buffett continues to deploy capital into his own company through share buybacks, effectively rewarding long-term investors and enhancing shareholder value.
In conclusion, Warren Buffett’s investment prowess and disciplined approach have cemented his reputation as one of the most successful investors of all time. By focusing on undervalued opportunities and maintaining a long-term perspective, Buffett has created substantial wealth for Berkshire Hathaway shareholders over the decades.